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DB transfer values remain steady over February

Defined benefit transfer values remained largely unchanged from January to February according to Xafinity’s latest data.

Figures from the firm’s transfer value index shows transfer values have been stuck in the same pattern since mid-September 2017.

This has been driven by gilt yields and inflation that were constant over the month as the index climbed from £231,000 at the end of January to £232,000 at the end of February.

The difference between maximum and minimum readings over the month was £4,000 or around 1.6 per cent.

Xafinity Punter Southall head of defined benefit growth Sankar Mahalingham explains the dynamics behind current transfer values.

He says: “During February, the Bank of England Monetary Policy Committee kept the official bank rate at 0.5 per cent, but also indicated that rates may need to go up more quickly and further than previously thought during 2018.

“The impact of this on longer-dated gilt yields was muted, and it is these that affect transfer values rather than the official bank rate.

“This suggests the comments from the Bank of England’s committee were broadly in line with market expectations.

“While the market is anticipating gradual rises, any delay in actual rises would likely mean an increase in transfer values if the delay is expected to be prolonged.”

The index tracks the transfer value that would be provided by DB scheme to a member aged 64 who is currently entitled to a pension of £10,000 each year starting at age 65 and increasing each year in line with inflation.

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